Mortgage rates dropped slightly this week after moving upwards for the last 5 weeks; the 30-year fixed mortgage rate falling from 3.56% to 3.55%. The unemployment rate has dropped to 3.9%, close to the pre-pandemic level of 3.5%. In addition, inflation soared to its fastest pace in the last four decades. In order to keep inflation under control the Fed announced they may increase short term interest rates which has a domino effect from banks to consumers and eventually to 30 year mortgage rates. The National Association of Realtors predicts that by the end of this year rates will be around 3.9%, inline with the ten year average. What does this look like for the average 30 year mortgage? Here is a link to the 2021 median home price by state. Using the BankRate.com mortgage calculator you can plug in the current 30 year mortgage rate and decide if the monthly payment difference is worth missing out on the current market and long-term investment in real estate.
Here are some examples in our local market: The 2021 median condo price on the East Shore of Lake Tahoe was $699,000, at the current interest rate of 3.55%, the monthly payment with 10% down would be $3368. If mortgage rates rise to 3.9%, as predicted by the end of 2022, the monthly payments would be $3493, a difference of $125 per month. For a single family home in 2021, the median was $1,425,000, the payment at 3.55% is $6798, at 3.9% the payment would be $7053, a difference of $255 per month. This may discourage some first-time home buyers but is not likely to affect our market as our average price per square foot is still significantly low for the majority of our recent buyers who are investors and families from out-of-state who have taken on permanent work-from-home positions. For example, the average price per square foot in the Bay Area in 2021 was well over $1000 per square foot compared to the Nevada, East Shore of $577 and $631 per square foot for condos and homes respectively. I sent out my in-depth market update to everyone on my mailing list in January so you should be receiving it any day now. If you would like to be included in my quarterly updates please reply with your current address and I’ll add you to my mailing list.
I’ve put together some information below that I think you’ll find useful. If you have anything you want to share with our community please let us know so that it can be included in future newsletters. We at the Zager Group are honored to continue to serve our community and are available if you have any questions or if we can provide you with any services, please feel free to reach out anytime. Thank you for the opportunity to serve you and for your continued trust and support!
Thank you!
Craig Zager & The Zager Group
New Residential Sales
December 2021
New Houses Sold* 811,000
New Houses For Sale** 403,000
Median Sales Price $377,700
* Seasonally Adjusted Annual Rate (SAAR)
** Seasonally Adjusted
Source: U.S. Census Bureau, HUD, January 26, 2022